The AI bill comes due, by Javier Molina
Javier Molina, eToro market analyst, puts forward an uncomfortable idea: artificial intelligence can transform the economy and, at the same time, prove a disappointing investment for those funding its development.
The example is Alphabet. Google Cloud doubled its revenue in the third quarter, but investors are no longer looking only at sales. They are also looking at how much needs to be invested in data centers, chips, and electricity to maintain that pace, and how it is financed.
For Molina, that changes how these companies should be valued:
• A company can sell more and still deserve a lower valuation if it needs to devote ever more resources to defending its position.
• If it takes on debt or issues shares, the return per share for existing shareholders is lower.
• Who is behind the orders matters. Alphabet includes $16.8 billion from Crux AI in its contracted backlog. Alphabet has a stake in the company and provides it with financial backing, and the amount represents around 3% of the total.
He outlines three scenarios. In the favorable one, infrastructure use grows enough to recoup the cash invested. In another, AI delivers on many of its promises while investment and competition absorb returns for years. The most concerning scenario would come if higher financing costs began to curb projects and orders.
Before buying the dip, Molina would look at the cash left after investment, how the number of shares is changing, and the company’s ability to meet its commitments without repeatedly returning to the market. His conclusion: a 20% drop only tells you how far a share price has fallen, not what the thing you’re buying is worth.
Informational content, not investment advice.
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